Site icon Truth on the Market

Antitrust at the Agencies Roundup: Rounding up the Roundups

It’s Not All About Price, Except When We Say So

I don’t know if this is the end of an era, the end of an error, a bit of both, or something far more complicated than that, but let’s start with Federal Trade Commission (FTC) Commissioner Melissa Holyoak’s dissent in In the Matter of Southern Glazer’s Wine and Spirits, which is a part of the FTC’s bold, if misguided, endeavor to reanimate the Robinson-Patman Act (RPA)

The dissent is an excellent and scholarly statement. It’s also 83 pages long. I recommend it (seriously), but it is 83 pages and I’ve read it so that you don’t have to. 

For those seeking a cheat sheet even more abbreviated than my own, Holyoak provides a mini-nutshell on the very second page. Having rightly pointed out that the commission’s complaint elevates “the interests of competitors over competition,” she offers the following:

That is not to say that enforcement of the Robinson-Patman Act is never warranted. As a Federal Trade Commissioner, I take seriously that Congress enacted the Robinson-Patman Act. And as law enforcers, the Commission must faithfully execute the law. But we must take care to enforce the law as Congress wrote it and should only bring those cases that satisfy the statutory requirements Congress has outlined. Today’s Complaint is inconsistent with the statute Congress has written. As the Supreme Court has instructed, the Commission should not advance arguments that require us to “construe[]” the Robinson-Patman Act inconsistent “with broader policies of the antitrust laws,” especially where that inconsistent application harms consumers. (internal citations omitted)

There is a useful section on the history of the RPA—useful for statutory construction, even as I remind myself that legislative intent is a more-or-less useful fiction: sometimes more useful, sometimes less, and always something of a fiction. It is useful, too, as propaedeutic (ideally therapeutic) to the majority’s penchant for hoary, selective, and sometimes dubious references to the congressional record and the case law.

More to the point, perhaps, are the facts of the case, the statutory language, and the relevant jurisprudence. We are reminded of the statutory language, which prohibits price discrimination where, among other things, “the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly.” (emphasis added) That’s not price discrimination tout court.

And we are reminded of the Supreme Court’s caution that RPA enforcement ought not construe RPA to be inconsistent “with broader policies of the antitrust laws,” especially when that’s to the detriment of consumers. That’s straight from Brooke Group v. Brown Williamson Tobacco, which sought—consistent with established principles of statutory construction—to read the text of RPA so as to be consistent with, at the very least, the whole of the Clayton Act (which RPA amends). 

Note, too, Commissioner Holyoak’s reference to the majority’s use (or misuse) of the Morton Salt inference; that is a 75 year-old case that reflects evidentiary standards that were based more on a botched understanding of the underlying facts and economics at-issue than on the meaning of the RPA. Holyoak rightly points out that both the inference and its application are undercut by a thorough (469-page) study, from 1995 by the FTC’s own Bureau of Economics (conducted by its then-Director John L. Peterman), and that better grounding of the commission’s approach to RPA has been prominent since then.

Also worth noting is the (only comparatively) slender 320-page report on RPA issued by the U.S. Justice Department (DOJ) in 1977. That’s recently been “stickered” with the unsubstantiated claim that:

This report is out of date and is retained for historical purposes. Although it remains accessible on the Antitrust Division website, the report no longer reflects contemporary economics or market realities and should not be relied on for current matters related to the Robinson-Patman Act.

That is a nod, if not a bow, to the current FTC majority’s penchant for such stickering (and claimed withdrawals) of prior FTC research, advocacy, and enforcement, commonly without much of a rationale—something I wrote about here. And while we’re on that, see this thread by my International Center for Law & Economics (ICLE) colleague Geoff Manne. 

To be fair to the commission, Brooke Group was followed by Volvo, in which the clarity (and fact) of Brooke Group seems poorly reflected (which also seems poorly reflected in many lower-court cases). On the other hand, Volvo was an RPA case in which the U.S. Supreme Court reversed an 8th U.S. Circuit Court of Appeals holding in favor of the plaintiff. The Court held that a manufacturer cannot be “held liable for secondary-line price discrimination under the Robinson-Patman Act in the absence of a showing that the manufacturer discriminated between dealers competing to resell its product to the same retail customer.” As such, Volvo’s echoes of pre-Brooke Group jurisprudence might rightly be considered dicta.

And, for that matter, the dicta in Volvo run both ways. The Court winds up its opinion with Brooke Group-like harmonization, quoting GTE Sylvania in emphasizing that “[i]nterbrand competition … is the‘primary concern of antitrust law,’” and that “[t]he Robinson-Patman Act signals no large departure from that main concern.” And more directly echoing Brooke Group, the Court then said that it “would resist interpretation [of RPA] geared more to the protection of existing competitors than to the stimulation of competition.”

To be fair to the Southern Glazer’s case, competition, and consumers everywhere—and acknowledging Brooke Group, which is still good law—we ought not to presume that differential prices (persistent or not) are themselves anticompetitive. Price discrimination (or “price differentiation,” “differential pricing,” etc.) has been studied at least since A.C. Pigou’s and Frank Ramsey’s landmark work in the 1920s (and, more recently, Hal Varian, Varian & Allesandro Acquisti, and many more before and since).

It is well-understood that price discrimination can be anticompetitive or welfare-reducing, but equally, that it is not generally anticompetitive and, to the contrary, can be pro-competitive or welfare-enhancing. For a recent—and extremely accessible—discussion, see my colleague Brian Albrecht here.

There are conditions under which we might expect one result or the other, but reading RPA to suggest that a prima facie showing of differential prices places a substantial burden on the defendant to justify the differentials reminds me not so much of any “contemporary economics or market realities,” but Dickens (still a good read), in which we can read that sometimes “the law is a ass – a idiot.”

Prior (pre-Biden administration) agency policy (and the Peterman report, and the DOJ report) are entirely consistent with mainstream antitrust law and economics and, not incidentally, with the 2007 report of the bipartisan and congressionally mandated Antitrust Modernization Commission, which was unequivocal in its recommendation that:

Congress finally repeal the Robinson-Patman Act (RPA). This law, enacted in 1936, appears antithetical to core antitrust principles. Its repeal or substantial overhaul has been recommended in three prior reports, in 1955, 1969, and 1977. That is because the RPA protects competitors over competition and punishes the very price discounting and innovation in distribution methods that the antitrust laws otherwise encourage. At the same time, it is not clear that the RPA actually effectively protects the small business constituents that it was meant to benefit. Continued existence of the RPA also makes it difficult for the United States to advocate against the adoption and use of similar laws against U.S. companies operating in other jurisdictions. Small business is adequately protected from truly anticompetitive behavior by application of the Sherman Act.

And the Antitrust Modernization Commission was right. Congress really ought to repeal the RPA. While we’re here, I’ll recommend Bill MacLeod’s considerably more recent discussion here.

Genuinely anticompetitive conduct—including anticompetitive price discrimination, when it occurs—can be reached under the rest of the federal antitrust laws. To the extent that that’s what RPA seeks, it is redundant. To the extent it seeks something else—or is deemed to—it is far more likely to harm competition and consumers than to help either. And whatever other policy goals Congress should seek to advance, it ought to give the FTC a coherent mission. 

As I noted up top, Holyoak’s dissent—like that of Commissioner Andrew Ferguson—stops short of full-throated repudiation of RPA enforcement. To the contrary, she expressly denies that “enforcement of the Robinson-Patman Act is never warranted.” She recognizes that “the Commission must faithfully execute the law.” She emphasizes, however, that “we must take care to enforce the law as Congress wrote it and should only bring those cases that satisfy the statutory requirements Congress has outlined. Today’s Complaint is inconsistent with the statute Congress has written.”

Fair enough, I suppose: the commission is not the legislature, and it cannot repeal duly enacted statutes, even where the law might be “a ass.”

But the complaint in Southern Glazer’s seems to be the commission (that is, a for-now three-member majority) doubling down on their unfounded conviction that price discrimination tends to be anticompetitive—facts, circumstances, and demonstrable effects on competition and consumers be damned. 

There are at least several complications with vigorous (and perhaps careless) reanimation of the RPA.

First, there’s always the question of scarce resources, with both federal antitrust-enforcement agencies routinely complaining to Congress (and not without reason) that resources for the proper fulfillment of their statutory mandates are scarce.

Second, that’s not a reason to set aside the law, but it is a very good reason to prioritize cases where competition and consumer welfare are plainly and substantially at stake. As Commissioners Holyoak and Ferguson both emphasize, that was not at all clear (or else simply not present) in Southern Glazer’s

Third, the question of what counts as a clear violation of the RPA is not so easy—not if we acknowledge the Supreme Court’s holding in Brooke Group and, not incidentally, the statutory language itself. If we take seriously the statutory demand that RPA address price discrimination where its “effect” is to harm competition or “tend to create a monopoly,” then we ought to be wary of bringing cases solely on the presumption that a showing of substantial and somewhat-durable price differentials are prima facie evidence of a violation (and that enforcers ought not to worry much about bringing cases based on anything more than meeting such a prima facie burden).

And Another Thing

While we are (or I am) on the topic of “sure, enforce the law, but choose the right cases,” I’ll confess to being a bit puzzled by Commissioner (and soon-to-be-Chair) Ferguson’s concurring statement in FTC v. 1661, Inc. d/b/a GOAT.

It’s not that I think that the case ought not to have been brought. I’ve not done a deep dive on this one, but one can well imagine a firm failing to live up to its material promises in violation of the FTC Act (and sometimes FTC consumer-protection regulations), and the allegations plausibly fit the mold. Marketing assurances that are not delivered can violate the act’s prohibition of unfair or deceptive acts or practices, in some cases in ways that resemble (or might even constitute) statutory or common law fraud or, perhaps, breach of contract. 

Rather, I wonder about his insistence that:

we must vigorously enforce the antitrust laws against any platforms found to be unlawfully limiting Americans’ ability to exchange ideas freely and openly. We must prosecute any unlawful collusion between online platforms, and confront advertiser boycotts which threaten competition among those platforms.  

It’s hard to object to enforcement against “unlawful collusion” and group boycotts. I’m wondering, however, what he has in mind as the relevant domain—the circumstances that warrant such intervention.

Some horizontal collusion is, indeed, prohibited under the antitrust laws. But his description of the Murthy case—a messy one, to be sure—is one the plaintiffs lost, not to mention one in which the collusion was alleged to be vertical. What’s more, it’s alleged to have been coerced by federal government actors, who are hardly themselves “in commerce” for purposes of antitrust enforcement, much as they might muck about, and hardly cast as (even alleged) pawns in the service of horizontal conspirators in a hub-and-spoke conspiracy. 

Ferguson is right that horizontal agreements among competing tech firms could violate the antitrust laws. And straying beyond antitrust, I’m inclined to agree that  “[c]ensorship, even if carried out transparently and honestly, is inimical to American democracy.” But the unilateral conduct of private firms in moderating content on their platforms seems something other than collusion and, for that matter, not at all a case of government censorship.

Commissioner Ferguson’s insistence that “the Commission must use the full extent of its authority to protect the free speech of all Americans” makes me worry—perhaps unduly—that enforcers’ days of frolic and detour, within and without their proper jurisdiction, are not yet done.

More on the Eternally Revolving Door 

I’ve not yet seen any announcement of Chair Lina Khan’s departure from the FTC, although there’s speculation that we’ll hear something by the end of 2024, and that she’ll be gone in January, perhaps before Donald Trump’s inauguration. Trump has announced that Commissioner Ferguson is his choice as FTC chair. Because Ferguson is a sitting commissioner, whose elevation to the role of Chair (“Chairman,” as per the statute) does not require Senate confirmation, the position of first among the commission’s equals could be his in the early days of the administration. 

Khan’s term has expired already. But as others have pointed out, she remains in her position, and she could remain a member of the commission until the president nominates and the Senate confirms someone to fill her seat. Mark Meador has been announced as the someone-in-waiting.

Confirmation could take months (it typically does), so Khan could preserve a 3-2 Democratic majority on the commission were she to stay into the next administration. But that may be unappealing, given a waiting academic appointment, no assurance of very much more time at the commission, and the fact that she would lose her agenda-setting authority and, no-doubt, many of her key senior hires.  

And as it happens, her ally and co-revisionist at the DOJ Antitrust Division Jonathan Kanter has already announced his departure in farewell remarks posted on the DOJ website. I think I recommend them, although I’m not sure why. They provide the expected and appropriate thanks to the staff and a review of DOJ accomplishment. And there have been such, through the expected and at least partly appropriate lens of permissible puffery.

The rest is an odd mix of contentious—and, in some ways, distorted—legal and social history, as well as an excess of folksy navel-gazing of a sort I wouldn’t expect from “a kid from humble beginnings in Queens, New York (and a lifelong Mets fan).” Then again, it’s his stage, for the moment, so he gets to sing whatever song he wants on his way out of the building. 

While we’re on the topic of navel-gazing, and perhaps of no possible interest, is that my roundups here at Truth on the Market have focused on a large part of the Khan-Kanter years. I left the FTC because I didn’t care to stay in Chair Khan’s policy office (no, she wasn’t mean to me, I just didn’t see the point of advocating for diminished consumer welfare).

In fact, in my very first post here, I described myself as a “Refugee from the FTC.” A bit snarky, perhaps, but also bittersweet, as I felt that agency leadership had lost its way. I’d long respected what most of us had thought to be the agency’s mission, not to mention many of its accomplishments. Not incidentally, I had many excellent colleagues in that building with the unfortunately overblown (if not Stalinist) horse statue in front.  

Where we’ll end up, I cannot say. We’ll have new leadership at the DOJ rather promptly, but that leaves the question of an antitrust agenda under the new administration. Gail Slater was a colleague of mine at the FTC, where I found her to be smart, thoughtful, and collegial, but that’s not to say that I know her plans or those of the incoming administration. There will be some changes, to be sure, but some signals of ongoing concerns about “big tech,” if not necessarily “big” more generally, and we shall see.

At the FTC, there’s the question of when we’ll have a new majority on the commission, the question of what the new majority will prioritize, and the questions of when, whether, and to what extent the new majority will roll back actions taken by the previous majority. 

As for the record, it’s not so grand as leadership might suggest, nor so dire as others might wish. In brief, the agencies have won some and lost some. It seems that, where they’ve been successful, it’s been on more established grounds and not, for example, any sort of repudiation of the consumer welfare standard.

For example, as I noted in January, the DOJ succeeded in blocking Jet Blue’s acquisition of Spirit Airways. That was an odd decision and, as I noted at the time, in many ways unfortunate. In his decision, Judge William G. Young, of the U.S. District Court for the District of Massachusetts:

recognized that, as a matter of fact, the merger would be procompetitive, on net, on a national level. But because he agreed with the government that the merger was likely to harm competition “in at least some relevant markets”—that is, on some specific city-to-city routes among the hundreds identified in the government’s complaint—he ruled it a violation of Section 7 of the Clayton Act. That decision was not baseless, in law or fact, but it was hardly necessary, and it’s unfortunate for both competition and consumers. 

But the argument was relatively straightforward under the Baker-Hughes burden-shifting framework, given the narrow markets identified and a finding of harm “in any market,” even if the judge could have ruled otherwise, even if we might wonder about the refusal to consider countervailing “out-of-market” effects (see Brian Albrecht, Geoff Manne, and me here), and even if we find the division’s case selection regrettable. 

And now for more…quick reviews of outstanding issues—new rules, cases, etc.

Rules and More Rules

Many of us have noted the considerable controversy over the question of whether Congress, in Section 6 of the FTC Act, granted the commission general competition-rulemaking authority. There’s considerably less controversy over the question of the FTC’s consumer-protection rulemaking authority, whether under the Magnuson-Moss Warranty Act amendments to the FTC Act, or more focused grants of regulatory authority, such as those found in the Fairness to Contact Lens Consumers Act or the Children’s Online Privacy Protection Act. 

The commission’s latest bit of consumer-protection rulemaking is the Trade Regulation Rule on Unfair or Deceptive Fees, which was announced by the FTC Dec. 17 (and is not yet published in the Federal Register). I need to spend more time with the details, but on an initial read, this seems an improvement over the FTC’s notice of proposed rulemaking (NPRM) from November 2023, and a huge improvement over its 2022 advanced notice of proposed rulemaking (ANPR).

As then-Commissioner Christine Wilson pointed out in her dissent, the scope of the ANPR was extremely broad, raising concerns that ranged from regulatory process, to the economic and enforcement experience foundations of the proposed rule, to the specter of the “Major Questions Doctrine.”

But as noted in Commissioner Holyoak’s statement accompanying her vote in favor of the rule, the final rule is considerably narrower than the sprawling ANPR, and so much for the better.

I should note that Commissioner Ferguson dissented from the rule’s adoption, albeit on “grounds having nothing to do with the merits of the Final Rule, or with its compliance with the requirements of Sections 5 and 18 of the Federal Trade Commission Act.” His objections seemed essentially political. 

That’s not to say that his objections were either wrong or right, even if they were not typically what we seek in commission and commissioner opinions. On substance, he agrees with Commissioner Holyoak, at least to the extent that the final rule represents “a significant improvement over” the ANPR.

The narrowing in scope is conspicuous, as the final rule addresses, specifically, “certain unfair or deceptive practices involving fees or charges for live-event tickets and short-term lodging: bait-and-switch pricing that hides the total price by omitting mandatory fees and charges from advertised prices; and misrepresenting the nature, purpose, amount, and refundability of fees or charges.”

I’ll leave some of the details for the new year but would note, for now, Holyoak’s qualification that her “vote in favor of the Final Rule should not be read as a full-throated endorsement of the entire 300-plus page document. … [and that] parts of the Statement of Basis and Purpose address issues and make findings well beyond the scope of the Final Rule.”

The details matter, of course—perhaps greatly. To borrow from Commissioner Holyoak, my comments here “should not be read as a full-throated endorsement” of the final rule. But it’s easy enough to imagine “bait-and-switch” pricing policies that may be violative of Section 5 in these domains, and at least some such policies are unlikely to be offset by countervailing benefits to consumers or competition. 

Optional resort fees are one thing—perhaps a good and pro-consumer thing under various circumstances. I don’t play golf and I’d prefer not to pay for a golf course if a resort happens to have one. But substantial (let’s say “material”) mandatory fees, undisclosed prior to arrival, are another thing entirely.

Let’s say a family of four makes reservations for a holiday vacation, booking airline travel and resort accommodations. They arrive in a distant locale, only then to learn that the hotel has added substantial undisclosed fees to their bill (not taxes–those are not covered by the rule). If they only discover the fees at checkout, they might well be surprised (furious, embarrassed, any number of things). And the agency might well have a viable Section 5 case based on a material and misleading omission.

If the family learns of the charges at check-in, the agency might still have a viable UDAP case. The family has traveled to the locale and the resort, only to discover fees that, on assumption, are material to the plans they’ve made. There are sunk costs of travel, including both the air travel and the travel from the airport to the property. There’s the holiday vacation time that’s been set aside, and there’s the cost of seeking comparable lodging elsewhere. Such lodging may be unavailable during a busy holiday season, or unavailable at a comparable price, and, in any case, would need to be identified via last-minute search.

Those seem very much like reliance damages that they might argue in a breach-of-contract claim, due to what the FTC might argue to be UDAP violations under Section 5. If the practice is widespread, etc., there might well be grounds for Mag-Moss rulemaking to prohibit it—at least on the assumption that there are no countervailing benefits to competition and consumers, and I’ve described a scenario in which I don’t see any such benefits. 

Material misrepresentations (including omissions) of return or cancellation policies might be actionable as enforcement matters and, similarly, if widespread in a given market, might justify a rule. 

So, at least there’s a “there” there. At least some of this might be to the good and, as was noted with regard to the Hart-Scott-Rodino rules, it’s good to see agency leadership moderating its most expansive impulses (Holyoak here, Ferguson here, me here).

And the Other Rules?

There is, of course, the controversial (and embattled) noncompete rule. As I wrote back in August, Judge Ada E. Brown of the U.S. District Court for the Northern District of Texas vacated the FTC’s sweeping noncompete regulation: 

The Court sets aside the Non-Compete Rule. Consequently, the Rule shall not be enforced, or otherwise take effect on its effective date of Sep 4, 2024 or thereafter.

Vacateur, in Judge Brown’s opinion, was based chiefly on the question of whether Section 6(g) of the FTC Act was a grant of general legislative competition-rulemaking authority. To that question, Judge Brown answered “no.”

That decision is being appealed by the FTC, as is a decision from Judge Timothy J. Corrigan of the U.S. District Court for the Middle District of Florida, based chiefly on Major Questions Doctrine grounds. It’s worth noting, of course, that one federal district court refused to enjoin the rule, as Judge Kelly Hodge of the Eastern District of Pennsylvania ruled in favor of the FTC.

I don’t expect the FTC’s rule to prevail, but my expectations are not federal courts of appeal, so we shall see. Of interest are both what the courts might do and what agency leadership might do, given that both soon-to-be Chair Ferguson and Commissioner Holyoak voted against the rule, with both disclaiming the commission’s authority to issue it. 

I won’t rehash the reasons for my expectations, but for anyone who’s interested, and just to scratch the surface, relevant links are here to Ferguson (joined by Holyoak); Holyoak (joined by Ferguson); ICLE and scholars of law & economics; Thomas Merrill; Merrill and Kathryn Tongue Watts; Richard Pierce; Noah Phillips; Christine Wilson; Brian Albrecht; Gus Hurwitz; a collection of various commentary edited by Dan Crane; and (sorry) me, me, and me. As my colleagues and I have said, no, that’s not a “full-throated” or general defense of noncompete terms in employment agreements. 

We might also ask whatever happened to the FTC’s ANPR on Commercial Surveillance. The commission’s sweeping (yet fuzzy) anti-tech ANPR was issued in August 2022, nearly two and a half years ago, to much fanfare and at least as much consternation (see Geoff Manne, Kristian Stout, and myself for ICLE here, for example). There’s been much discussion, but no agency follow-up and, in particular, no NPRM. 

What should come of it is little to nothing, which is not to say that there are no legitimate policy concerns about the commercial use of personal information (there are) or that the FTC, in appropriate circumstances, has no role to play in the space (it does, and Congress and the courts have both said so). 

There’s also the question of the remedies phase in the Google Search matter; the question of appeal in the Google Search matter; the Google ad-tech trial; Amazon; Apple; and on and on. 

On and on is where I might go–perhaps where I tend to go (I’m workin’ on it, ok?), but that’s plenty for now (see?). 

Wishing everyone happy holidays of whatever stripe you prefer, and peace, prosperity, predictability, and the rule of law in the new year.

 

Exit mobile version